The bypass hose also helps prevent cavitation of your water pump's impeller. If you plug it, the "one-hole" ERA method might not be enough flow -- either use the four hole Gessford Method, pictured below, or keep the bypass hose unplugged (I keep the bypass hose unplugged and use the ERA method).
![](http://www.gessford.com/cobraparts/Thermostat-08254.JPG)